Question: My daughter will graduate from college in December, and she’s already asked to live at home. She has a job offer locally as a teacher and wants save money to pay down her student loans.
My wife and I are happy to have her, but I want to charge her rent. My wife does not. I think it will teach my daughter some responsibility, but my wife says we’re simply taking money out of her pocket that could pay off her debts.
I counter that I KNOW our daughter spends money on frivolous things, just as we all did at that age. Interestingly, my daughter is OK with paying rent, but she disputes the amount I wish to charge, which is fair market value for rooms in our area. What do you think about all this, Howard? It’s causing some dissension in our household.
— Alan in Delaware
Howard Dvorkin CPA answers…
Before I wade into a family dispute, let me share one bit of good news that has nothing to do with who’s right or wrong.
If your daughter indeed plans to be a teacher, she can have her student loans eventually forgiven. That’s right, not reduced but wiped out.
The federal government has created a number of effective-but-complicated programs that are aimed at reducing the $1 trillion-plus in student loan debt that threatens to cripple future generations’ ability to buy homes and raise families.
The most powerful of these programs is called student loan forgiveness, but it applies only to those in certain professions, like nurses, firefighters — and teachers. Your daughter could quite literally save tens of thousands of dollars. Read Debt.com’s special report called Student Loan Forgiveness for Teachers.
Now, the tough questions: Do you charge your daughter rent? And if so, how much?
I can’t answer what’s right for your family, but I can tell you some scenarios I’ve seen work for other families I’ve counseled over the past two decades.
First, I agree you should charge something. However, the amount needs to be tied to a real expense if it’s to teach a lesson — so at minimum, your daughter should pay one-third of the electric and water bills, as well as the cable or satellite TV bill. She should also pay for her own smartphone or percentage of the overall bill.
Second, if you charge rent, offer a family discount. You mentioned “fair market value,” Alan. In most places around the country, that’s a steep price for a new teacher to afford. You can still teach your daughter a lesson about paying Real World expenses by charging a fraction of what she’d pay by answering For Rent ads.
Third, offer a rebate. To keep the peace in your family, offer to split the rent you take in — for every dollar your daughter contributes, you’ll invest another dollar in a retirement account set up in her name. She won’t be impressed, because in your 20s, the last thing you think about it saving for your 70s. However, your daughter will one day appreciate your wisdom.
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Email your question to email@example.com and Howard Dvorkin will review it. Dvorkin is a CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.